October 23, 2001. Steve Jobs presented the iPod. Apple was already a consolidated company famous for making user-friendly computers, so making a brand extension in the music industry was surprising, however, they made their entry based on the customer’s perception of their superior skills in digital software. On that note, I want to share with you the late Steve Jobs presentation of the iPod.
The iPod was a massive business success with over 400 million units sold since its launch. Most importantly, it also opens the door for a new product extension: The iPhone. Apple is one of the premier examples of brand extension, creating massive hits for brands. But what is a brand extension?
Brand extension is when a company or brand uses its recognition to launch a product in a different category, just like the Apple example. Other examples are M&Ms brownies, Kellogg’s Rice Krispies, Disney’s Disney plus, among others.
Brand extension strategies
There are eight types of brand extension strategies with some examples:
- A similar product in a different form from the original parent product: Tostitos chips and Tostitos salsa are a key component of any social gathering.
- Distinctive flavor/ingredient/component in the new item: Coca-Cola with its product variety like Diet Coke.
- Benefit/attribute/feature owned: Google offering google drive as an additional service. They are known for quickly finding information, why not storing?
- Expertise: Apple are experts in digital technology, moving from the iPod to the iPhone was a strategic move.
- Companion products: Products that complement the parent product, we can take Microsoft as an example, they develop Windows as an Operating System, and Microsoft Office as an upgrade to perform a daily task.
- Vertical extensions: This strategy goes around offering a product that is already inside the value chain of the brand. For example, a farm that sells eggs could also sell chicken.
- Same customer base: It occurs when a brand has a product that also would be loved by the same customer base. For example, a shirt brand could offer sweaters.
- Designer image/status: This occurs when brands become associated with status, for example, Ferrari, a carmaker, also makes sales with clothing, toys, and other products that show their brand elements.
Benefits of brand extension
For a consolidated brand, an extension can be an offense or defense strategy. They can be new sources of income by following one of the previously mentioned eight strategies. However, they can also be used as a defense by developing a product to take market share of a variation of your star product and avoiding competition.
Proper brand extensions come from understanding the needs and wants of your customer base and can be an excellent way to improve the financial health of a brand and a way to be innovative and relevant.
Risk of extension: Brand dilution
On the other side, a brand extension can end up in disaster. One example is samsonite’s outwear, the experiment was extremely disappointed mainly because the brand is known for its luggage, suitcases, and business bags. The company has removed the promotion of its clothing line after its failure.
Brand extension can be very confusing for people that know a brand for a certain quality or values. It can backfire and generate a negative association or end up in brand dilution, affecting the overall brand equity.
Like the case of Apple, a brand extension can be a great way to innovate and generate new business income. There is a lot of strategic elements and opportunities that marketers must consider when doing a brand extension. With proper market research and product development, opportunities are always there in the market.
I hope you enjoyed this week’s article. If you want to read about integrated marketing channels communications, please visit my last week’s post!